Italy GDP Shrinks 0.1% Q2 Amid Trade Uncertainty

Italy's economy contracted by 0.1% in the second quarter of 2025 compared to the first quarter, marking an unexpected shrinkage largely attributed to negative trade flows and the impact of increased U.S. tariffs and global trade uncertainties. Industrial sales dropped 2.2% month-over-month in May, with declines in both domestic and foreign markets, contributing to the overall economic slowdown. Despite this quarterly contraction, Italy's GDP grew 0.4% year-over-year, though this growth missed economists' expectations and led the government to revise its 2025 growth forecast down from 1.2% to 0.6%. The decline in exports, particularly outside the European Union, and an increasing trade deficit further pressured the economy, even as imports rebounded strongly in June. Meanwhile, output in agriculture and industry decreased, while the services sector remained largely unchanged. Italy's economic situation parallels similar stagnation in Germany, contrasted by stronger-than-expected growth in France during the same period.